No one is held accountable for wasteful drive to privatize API

Early in her reign as temporary budget director, Donna Arduin made it clear that the Dunleavy administration planned to privatize the Alaska Psychiatric Institute in Anchorage with a no-bid deal, cutting hundreds of employees from the state payroll.

“The removal of positions from the budget reflects the department's intent to ultimately transfer operational responsibility to a private entity,”  Dunleavy’s budget office said on Feb. 13, 2019.

To avoid competitive bidding, the Dunleavy administration kept top management positions open at the hospital and signed a no-bid deal with Wellpath on Feb. 8, saying it was an emergency.

The contract, which paid $1 million a month at the start, called for Wellpath to take full control by July 1, 2019 at a cost of $43 million a year until 2024.

The Wellpath contract said that state employees at API “shall be eligible to apply for rehire with Wellpath and have preference in that process.”

The Anchorage Daily News reported on the end to the Wellpath saga Sunday without mentioning the many ways in which the process was mishandled from the start with an illegal no-bid deal that should have never been signed. The state ended the Wellpath contract in July.

Alaska news organizations have never provided clear coverage of this debacle.

This was never about saving state money, but about cutting state jobs. The central tenet of the Arduin approach to state government, fully endorsed by Dunleavy, was that state jobs should be turned into private jobs for ideological reasons. The assumption was that private operation would be better, even though a comprehensive 2017 study had concluded otherwise.

Since early 2019, it has been obvious that the Dunleavy administration failed to follow procurement rules and union contracts with its attempt to force the long-term contract.

Just before the state was going to lose a court case in April 2019, the long-term deal was halted. Wellpath continued on an interim basis until this summer.

As part of the pullback on April 22, 2019, Health Commissioner Adam Crum said he would try to get a Boston consultant to revise its privatization feasibility study from 2017 before seeking a private API contractor by competitive bids.

Crum hoped that the authors of the 2017 study would reverse the finding that API, “at the center of a fragile network of behavioral health services,” should stay in public hands.

“Our findings demonstrate that continued state management is not only the most advantageous route for generating overall cost savings, but that it also avoids many of the risks involved in contracting out the management of critical public infrastructure,” the Public Consulting Group had concluded.

The state signed a $50,000 contract with PCG on April 19, 2019 to update its report, with the finished product due on June 30.

But as could have been easily envisioned, PCG did not agree to reverse its conclusions.

On May 31, Deputy Health Commissioner Albert Wall wrote to PCG to say the study should stop. “An update to an old study is not sufficient to address the changes in the in-patient psychiatric milieu that have occurred since that study was produced,” Wall said.

In August 2019, the state tried again to get a feasibility study of the milieu, one that would support the Dunleavy plan.

It scrapped that plan in October, saying the bids it received were ”not in the best interest of the state.” The contractors did “not provide for consideration of all factors of significance to the state.”

The state issued another request for a study in October. finally awarding a $183,000 contract to the Western Interstate Commission for Higher Education.

When the state released the long-delayed report this spring, the document did not provide the endorsement of privatization that the Dunleavy administration had sought. The study made no recommendations on that score, a finding that may have doomed the effort.

The new feasibility study found no real savings would be had by turning over the hospital to a private company.

It gave a slight edge to a private facility, but used some questionable financial assumptions. The Alaska State Employees Association identified problems in the WICHE statistics, which made the case for continued public ownership much stronger.

The state cut its monthly payments to Wellpath from $1 million a month to $200,000 a month as of April 1, a reduction that lowered the cost of public operation, a calculation that was not in the WICHE analysis. State operation would cost from $1 million to $3.9 million less a year, the union said.

Dunleavy administration officials now tell the Anchorage Daily News that the $12.5 million given to Wellpath since early 2019 has led to various improvements. Of course they have to claim they were right all along.

But the real record of the past 18 months shows that the campaign to put the Alaska Psychiatric Institute in private hands with a no-bid contract was flawed from the start, driven by ideology. The state has wasted money and time hiding its mistakes. And no one has been held accountable.

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